Generation from renewable resources in a restructured US electricity market: A long-term analysis of impacts and policies

The choice of renewable energy sources in the future generation mit could be affected by the US electricity industry's restructuring toward a market-oriented structure because marker objectives based on private value judgments may conflict with social policy objectives toward better environmental quality. The results of a quantitative assessment of the trade-offs involved in resource selection in an emerging competitive market of the future US electricity industry are presented in this article.(1) Long-range (2000-2020) generation capacity planning and operation decisions are simulated under alternative market paradigms. Price-sensitive demand is used to simulate customer preferences in an open market. A Reference Case represents the benchmark for a socially-optimal diffusion of renewables and a basis for comparing outcomes under alternative marker structures, A Competitive Case represents a marker with many generation suppliers and decision-making based on private costs. Finally, a Market power Case models the extreme case of market power: monopoly. The results suggest that the share of renewable energy sources would decrease (and emissions would increase) considerably in a restructured US electricity marker. The reduction is greater in the Marker Power Case due to pricing decisions under existing supply capability. The analysis further shows that, among environmental policy tools, Renewable Portfolio Standards (RPS) would ensure an increased share of renewables in the generation mix On the other hand SO2 emissions caps would not support a shift to renewables in an era of inexpensive natural gas. If market power exists, generally higher levels of policy intervention would be necessary.